Your Stimulus Dollars at Work: Installing New Air Conditioners For Old Folks Who Question The Wisdom of Stimulus Dollars

Your stimulus/tax dollars at work, local edition. Keep in mind this sort of tale is playing out (or will be shortly) all over this sweet land of liberty.

One person who will likely benefit from the stimulus is Aileen Koelker, a 73-year old Ford retiree who lives in Golden View Acres, a retirement community for seniors built by the city of Sharonville [Ohio] in 1981.

Sharonville expects to get $93,000 to replace up to 33 heating and air conditioning units—many of which are now 28 years old—to more energy efficient models.

"It would be nice to have new air conditioning and a new furnace. I guess it will put some people to work," said Koelker, who spent nine years on a waiting list for the two-bedroom, rent controlled apartment.

"I don't think it's frivolous spending," she said. "On the other hand, I get tired of people thinking that the government needs to pay for everything. I just wonder how far into debt we can afford to go with this." [*: See answer below]

Note the lingo above; the project is not even to give people AC for the first time, but upgrade them to "more energy efficient models" (and what, one wonders, happens to the godforsaken electric company employees when demand goes down? Can we pass a law that the recipients need to leave the AC on high all the time?). More here, as The Cincinnati Enquirer tallies up "small" projects and notes:

It's a common complaint from local community development officials: the Obama Administration wants to see evidence that the stimulus is putting people to work, but hasn't given any guidance on how to count those jobs.

"It's totally a guess how many people it's going to take to do this," said [Butler County, Ohio administrator Donna] Everson. "That's our concern with all these project estimates coming down. The regulations and rules keep changing on us."

And that's not even considering exactly what impact this sort of spending, big or small, is likely to have on the actual real economy. Which is likely to be zero, or even less than zero.

[*] By the way, the answer to the question about how far into debt we're going with all this? Courtesy of Instapundit, a scarifying chart of federal budgets past and future:

Comments

[Alan Vanneman]

Nick, Nick, Nick. I guess you will simply never get it into your head that the point of stimulus spending is not to spend it well, but to spend it NOW. If you want to object to the stimulus, object to it in toto. But don't object because the government isn't getting the best deal, isn't spending it only for things that are "necessary," etc., etc., etc. By your own standards, after all, none of it is "necessary."

[ed]

Aileen Koelker, a 73-year old Ford retiree

Damn that Greatest Generation. They're ruining everything for the Boomers!

[SugarFree]

I'd rather pay taxes for her to have a new air conditioner than for a UAW worker to keep his overpaid job.

Of course, I'm just the silent partner when it comes to government spending... an open wallet and a stitched shut mouth.

[Chad]

Good job of finding a nice fat market failure, Nick, and pointing how a bit of government spending can fix it - and in doing so, create jobs and provide a nice return on investment.

Anyone who lives in an old apartment would be able to tell you that they are typically massively energy inefficient, and that it is in no one's direct interest to solve this problem. The landlord doesn't pay the bill, the renter won't live there long enough to get his money back, and neighboring apartments cross-subsidize each other via heating/cooling through walls. And don't make the silly claim that some uber-rational renter can figure all this out perfectly and demand compensation in their rent for the inefficiency. Most people can barely balance their checkbook.

[SugarFree]

It's so cute when they use terms they don't understand.

[robc]

The chart is wrong, we never actually had a surplus.

Okay, okay, that said "budget". But I always include the "off-budget" items as part of the budget.

According to the Treasury Depts website, the US debt grew every year (since sometime in the early 50s), so we never actually had a true surplus.

2000 was very, very close to zero, but still slightly negative.

[robc]

Chad,

The landlord would replace it because it leads to effectively lower rents for the uber-rational renter, even if he raises rates.

[Kyle Jordan]

"I'd rather pay taxes for her to have a new air conditioner than for a UAW worker to keep his overpaid job.

Of course, I'm just the silent partner when it comes to government spending... an open wallet and a stitched shut mouth."

I'm with ya on this SF. And the second line is sad, infuriating, and frightening because it's so very true.

[robc]

Also, also, there is no such thing as market failure. A market exists anytime there is a transaction in goods/services/money between two entities. It doesnt exist before the transaction, it doesnt exist after the transaction. Hence, it cannot fail.

[Xeones]

Go easy on Chad, SugarFree. I took AP Macroeconomics in high school, too, and it's not easy to grasp at an age when you lack experience of how the world actually works. Of course, i wasn't pompous enough to go spraying my youthful ignorance all over the internet.

[Mike M.]

I guess you will simply never get it into your head that the point of stimulus spending is not to spend it well, but to spend it NOW.

If that's true, then why has hardly any of the stimulus money been spent yet?

[robc]

Mike,

Exactly. If the point is to stimulate now, spreading it out over 18 months, with it mainly backweighted seems like a really stupid idea.

[Chad]

robc | June 9, 2009, 8:58am | #
Chad,

The landlord would replace it because it leads to effectively lower rents for the uber-rational renter, even if he raises rates.

No, it would lead to higher rents but lower bills. And how many renters even have access to the average heating, cooling, and electric bills of the previous or average tenants? None.

This is a problem for energy efficiency in general but is particularly egregious with respect to renting.

You can keep on dreaming your libertarian "This has gotta be rational somehow" dreams, but the fact is EVERY old apartment I have been in is spectacularly inefficient, except for one that I lived in overseas (it had just been updated).

[FrBunny]

"I don't think it's frivolous spending," [Koelker] said. "On the other hand, I get tired of people thinking that the government needs to pay for everything."

Multiply this cognitive dissonance by 200,000,001 and you have just proved Alexander Fraser Tytler right.

(Ok, ok; it probably wasn't actually Tytler.)

[John]

Can we pass a law that the recipients need to leave the AC on high all the time?

Don't tempt them.

[Kent]

ed,

I was under the impression that the Greatest Generation includes people who grew up during the Great Depression and went on to fight WWII. Eileen was born in 1935 or 1936. She probably does not remember much about the Depression and was 9 or 10 years old when WWII ended.

My father fought on Iwo Jima. I have not discussed this particular boondoggle with him, but I don't think he was ever under the impression that his service earned him a new air conditioner paid by for his kids and grandkids.

[robc]

No, it would lead to higher rents but lower bills. And how many renters even have access to the average heating, cooling, and electric bills of the previous or average tenants? None.

Clearly you have never rented an apt where all or part of the utilities were included in the rent.

I have.

This leads to other issues, like always setting the thermostat at the most comfortable setting, not the level Im willing to pay for, but that is beside the point.

[SugarFree]

Xeones,

Sorry, I had a bad acid flashback to someone screaming "Exteralities" over and over again like a demand for eggs in Pink Flamingos.

[Grob]

How about at some point the AC will fail and be unrepairable. At that time the landlord will replace it with whatever is currently on the market.

We have seen studies showing to be energy efficient one should run their existing car into the ground as the energy to produce a new one is higher than any efficiency gained.

This would have the added benefit of leaving the taxpayer THE FUCK ALONE!!

[P Brooks]

"I get tired of people thinking that the government needs to pay for everything."

Government spending on me, however, is entirely rational and proper.

In fact, my sciatica has been acting up; I think the government should buy me one of those new, high tech tunable mattresses. And send some nice young man with strong hands to rub me down every day.

[P Brooks]

I need some parts for my Porsche. Send me a check, Timmay!

[robc]

Grob,

ssssshhhh. You are giving away the secret. If is almost always economically better in the long run to replace something after it has worn out than mid-life.

Replacing your washing machine with an energy efficient one will save you money, but best to do it when your current one breaks down, not just because.

[Joe_D]

I think people are giving Chad too hard a time over this one. It's true that the market will not be perfectly efficient on something with long-term, slightly positive ROI. But the even in this airconditioner scenario, there are ways the market can work (e.g., install new AC, raise rents slightly, and use "energy efficient" as a selling point to new renters).

Chad, two questions... these old apartments you've lived in... did you ever run the numbers yourself to see upgrading would be worth it? Were these by any chance rent-controlled areas?... rent control skews these calculations for the property owner.

Finally, let's concede that there is a market failure here - that market incentives are such that something with a positive longterm ROI doesn't happen due to certain real market incentives. What's your solution? Do you think that government mandates or tax-paid upgrades can correct this failure? Do you think that gov't programs are free from "market" failure?, or, like me, do you see more potential for waste/inefficiency when the government is involved?

[Abner MacGillicuddy]

I don't think he was ever under the impression that his service earned him a new air conditioner paid by for his kids and grandkids.

Why not, he and his buddies already got a whole raft of benefits, from college tuition to subsidized mortgages to Social Security payouts at levels that no generation after them will see. And yes, all paid for with borrowed money.

Borrowed money that by 1980 formed the foundation for the huge increase in debt we have since since, mostly due to the magic of compound interest.

Boomers might take the biggest haul ever from the treasury due to their numbers but the Greatest Generation boys and girls got theirs in the biggest individual payoffs.

[JAck Deason]

LOL, just gotta love that reasoning! LOL

RT
http://www.anonymity.2ya.com

[robc]

Oh, primary reason for above is that even if it is slightly advantageous to throw away old X for more efficient one, by the time X breaks down their will be much more efficient ones than the one you replaced it with.

"2000 was very, very close to zero, but still slightly negative."

Who was president in 2000?

[P Brooks]

the Greatest Generation boys and girls got theirs in the biggest individual payoffs.

Particularly when you consider how much they actually paid into the Ponzi scheme system.

[robc]

Who was president in 2000?

Clinton. Who I didnt vote for. Followed by Bush, who I didnt vote for.

Not sure what who was prez in 2k has to do with the fact the the chart is wrong. Unless you are blaming Clinton for miscreating the chart, which I think is way off base. 🙂

[P Brooks]

What happens to the old, "inefficient" yet still functioning air conditioners? If they are sold off to somebody else, that means this program effectively increases overall energy consumption.

OMFG!

Clinton.

No. He took office in January of 2001.

[John Thacker]

Were these by any chance rent-controlled areas?... rent control skews these calculations for the property owner.

Indeed. I've been in plenty of apartments where the owner has upgraded to more efficient utilities, both when I was and wasn't paying for it. I also do ask about utilities before renting a place.

But when there's rent control, sure, the landlord has no incentive whatsoever to improve the place, especially not in any way that would in a normal market increase rents but lower utility bills.

"No. He took office in January of 2001."

So remember that the next time someone hands you the BS that Clinton Created a budget surplus.

[robc]

Clinton.

No. He took office in January of 2001.

I said Clinton. Reading comprehension problems?

[robc]

I think I might add blank names to my incif file (if that is possible), because it looks like he is arguing with himself now.

[Isaac Bartram]

Particularly when you consider how much they actually paid into the Ponzi scheme system.

Actually, no one paid anything into the "system".

They paid a tax, part of which went to pay current recipients with the remainder going into general revenues to meet current spending obligations.

This remainder or "surplus" then became part of the public debt. Debt, in this case, which the government owes to itself. This in no way, obviously, represents any sort of marketable asset which could be considered available as backing to the governments liability, in this case its promise to pay me a pension at some future date.

This, by the way, answers the conundrum that robc raised above about debt increasing, even in years where, ostensibly, revenues exceeded outlays. What actually happened was a transfer between debt held by the public and debt held by the government.

Now, if the foregoing seems convoluted, I apologize. A convoluted scheme requires a convoluted explanation.

And there must be a rule somewhere that says if a scheme is convoluted, it's probably a scam.

[Isaac Bartram]

But, of course, if one is going to treat FICA taxes paid as contributions to a pension plan, then, yes, the Greatest Generation crowd collected benefits far out of proportion to their "contributions".

But, hey, they beat the Nazis, so they earned it. Or, something.

Of course, none of that is going to stop the kids from crying, "Wah, I'm never going to get a pension, 'cause the fucking boomers will have stolen all the benjamins out of the Social Security Trust Fund."

[Chad]

I think people are giving Chad too hard a time over this one. It's true that the market will not be perfectly efficient on something with long-term, slightly positive ROI.

A truly perfect market would. But that requires superhuman rational actors who do not exist. Real people have a very strong tendency for short-term consumption over long-term paybacks. There was an interesting article in the New Yorker last month concerning studies with young children. They were put in a room with a tasty treat, informed that if they didn't eat the treat before the researcher came back, they would get TWO treats, and then were left alone for about fifteen minutes. Very few children made it, despite the 100% ROI in 15 minutes. These studies were performed long ago, and the children tracked. Guess which children were successful in life? The ones who waited, of course.

Adults are better due to our reasoning powers, but our instincts are very very powerful. Just ask the kids.

So yes, the government should be incentivizing efficiency and savings, which real people will not perform enough of on their own. There is the hypothetical "danger" that the government overshoots, but we are so far from that point that it is surely not a concern at this time.

[J sub D]

That fucking chart just screams fiscal responsibility, doesn't it?

Long time readers here have seen my screeds about the Bush administration, with GOP acquiescence, pissing away money we don't goddam have on things we shouldn't be goddam doing.

Anybody think Obama and the Dems are gonna get a pass from me? They're just a bunch of fucking spendthrifts charging parties on the grandkids credit cards. I find that thinking stupid at best. Blatantly immoral is probably a more accurate description.

[brotherben]

The electric companies in every place we have lived would freely give out the the amount of the monthly bills for the previous 12-24 months upon request.

[J sub D]

I'd rather pay taxes for her to have a new air conditioner than for a UAW worker to keep his overpaid job.

If she had done her time at GM or Chryssler, you'd be paying for the A/C AND subsidizing her pension.

[Isaac Bartram]

But that requires superhuman rational actors who do not exist.

No, the central planning you demand requires superhuman rational actors who do not exist.

A market just requires normal human beings.

Real people have a very strong tendency for short-term consumption over long-term paybacks.

No, they just make different decisions than you would.

And, while they might give us insights into how to raise children, I doubt studies of childrens' behaviour give us many insights into adults' behaviour.

So yes, the government should be incentivizing efficiency and savings,...

Yes, and runaway inflation and out of control spending just scream frugality and responsibility, don't they?

...which real people will not perform enough of on their own.

But, of course, Chad just knows exactly what the right levels of spending and saving should be for every single individual on earth.

Godammit, you a presumptuous, arrogant fucking prick. Someone needs to tell you that to your face, some time.

[robc]

The electric companies in every place we have lived would freely give out the the amount of the monthly bills for the previous 12-24 months upon request.

I wondered about that. It seemed familiar but I havent rented a place since 1997.

[ed]

Of course, none of that is going to stop the kids from crying, "Wah, I'm never going to get a pension, 'cause the fucking boomers will have stolen all the benjamins out of the Social Security Trust Fund."

That was the point of my pre-emptive comment. It's a waste of time and un-American to engage in class/generational warfare. We're not Bolsheviks. Yet.

[J_B]

The problem, Chad, is that government is full of the very same people you say have "?a very strong tendency for short-term consumption over long-term paybacks."

Your conclusion requires an assumption that receiving a government paycheck confers the capability of overcoming their supposed tilt towards short-term thinking.

[JB]

Obama is much more dangerous than Al Queda.

[robc]

Very few children made it, despite the 100% ROI in 15 minutes.

What is the time value of a cookie*? In a hyperinflationary cookie market it might be well over 100% in 15 minutes.

My point is: Who am I to say those that chose the current cookie over the future 2 cookies chose wrong?

I would prefer to wait. I think that is the right thing to do. But, I think acknowledging that despite all reasonable evidence, I might still be wrong, is important. Plus, hell, it isnt my life, do what you want.

It is why I wouldnt outlaw payday loans despite them being scum-sucking bottom-feeding low-life assholes. What about that ONE time** it actually made sense for someone to get a payday loan?

*or whatever the treat was. It was a cookie or cupcake, IIRC.

**I cant imagine it has happened much more than that.

[Tonio (Not Tony)]

...and what, one wonders, happens to the godforsaken electric company employees when demand goes down?

I don't think that piecemeal changes like this will cause the overall demand to go down. Electricity use has always trended up over time. At most, this could cause the demand to rise less steeply. However, if Gillespie has figures...

[R C Dean]

Who am I to say those that chose the current cookie over the future 2 cookies chose wrong?

Maybe they didn't trust the adults to actually deliver the promised two cookies in the future. A bird in the hand, and all that.

[Sean W. Malone]

Hear Hear Isaac.

I get a little sick of Chad hanging around here all the time not realizing the idiocy of his arguments.

If people are terminally short sighted, exactly why are politicians better? Especially given that every single incentive in politics is for short term gain to the politician and long-term loss to the people? A politician doesn't get elected saying "Hey everyone, we need to save money, so there won't be any Christmas this year from Congressional Santa Claus... Sorry!" does he? No... Of course not. He loses his job if he does that.

What's even more silly is that it's the Austrian School of Free-Market economists who explicitly recognize that values are subjective and people are not always perfectly "rational" actors in the sense that individuals don't just do what you want or expect them to do all the time, because... *GASP!*... you (Chad) don't know what they want 100% of the time.

Gosh, real people are complicated sometimes and don't always tell you, or researchers, what they really think or feel... and sometimes, they just work on momentary whims. But it's the buffoons like Larry Summers who advocate economic policy based on econometric models which assume perfect knowledge. Not (in general) the libertarians.

Chad's failure to understand the basics of libertarian philosophy aside, it'd be nice if he was at least consistent.

If people are irrational and short-sighted. Why are you handing over more power to a smaller number of short-sighted, irrational people with incentives to be worse than the public at large?

[..]

I get a little sick of Chad hanging around here all the time not realizing the idiocy of his arguments

A dissenting opinion offends you, Mr. Malone?

[Sean W. Malone]

No, dissent is just fine. Not realizing you're a moron and being an arrogant prick about it isn't.

Chad is, of course, always welcome here however.

[..]

Big tent here at H&R. No moderators. No pesky registration. All crackpots welcome.

[Gadfly]

"Chad, two questions... these old apartments you've lived in... did you ever run the numbers yourself to see upgrading would be worth it?"
Chad doesn't have to run the numbers. He knows the best way to run everything, everywhere through his amazing omniscience. Actually, he reminds me of an old coworker of mine. You didn't ever work at Starbucks, did you, Chad?

[Bill]

"No, dissent is just fine. Not realizing you're a moron and being an arrogant prick about it isn't.

Chad is, of course, always welcome here however."

Chad's arguments about economics tend to boil down to "people spend on money on different things than I would spend it on if I had that money, so markets are inefficient."

[Teh Almighty Chad]

Gadfly,
No, I have not. However, I could advise you on how to do your job better.

[Dr. K.]

A truly perfect market would. But that requires superhuman rational actors who do not exist.

No, it would require a market with ZERO transactional and information costs. That's not realistic and is why it doesn't happen.

[Bill]

"Real people have a very strong tendency for short-term consumption over long-term paybacks. There was an interesting article in the New Yorker last month concerning studies with young children."

Chad, could you possibly do anything more stupid than claiming that the behavior of young children accurately predicts the actions of all human being? Really.

[Bill]

"Human beings" not "human being". I hate joe'z law.

[Sean W. Malone]

The thing that always blows my mind about the arguments of people like Chad is that though I disagree with his usual de facto premise that people are stupid, the conclusions he draws from that premise are insane.

People are stupid, so we put a smaller group of stupid people in charge of everyone? Brilliant.

But hey - the experts are doing a great job of making everything run smoothly right now. And there's no politics involved even... just look at this fine article:

Obama's people are providing jobs for those who need it... not just handing out contracts to big business campaign supporters... ohhhhh wait.

[Bill]

"It would be nice to have new air conditioning and a new furnace. I guess it will put some people to work," said Koelker, who spent nine years on a waiting list for the two-bedroom, rent controlled apartment.

Note the "rent-controlled" part. Wonder if that has anything to do with the lack of capital expenditures on the apartment...Nah. It's just that they're not as smart as Chad.

[..]

Swarm, swarm!

[Bob]

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